Healthcare, and how we pay for it, is a complicated issue in the United States. Unlike many developed countries where governments provide healthcare services across the population paid for by taxes, in the U.S. we have a hybrid system: of private insurance paid for by employers, plus government-paid care for certain populations (primarily the poor and elderly). Employers and insurance companies, and the choices they make, therefore play a big role in how people experience healthcare in the U.S.
While many praise the freedom of choice that this system provides and the private market incentives it enforces, the variety of outcomes it produces includes (at least) one sad conclusion: two-thirds of people filing for personal bankruptcy cite medical expenses or lost income due to medical problems as a factor. Part of the reason for this unfortunate reality is the shift to higher deductible insurance plans that many employers have made in recent years (growing from zero to approximately 30% of healthcare plans as of 2017) as an effort to slow the spiraling cost of healthcare.
High deductible plans shift the burden of low-level medical costs – those caused by the unexpected E.R. visit for a broken arm, a child’s middle of the night allergy attack, or the full $4000 deductible due for something like a stroke – from employers to families that often don’t have savings and can’t afford these costs. This shift, along with things like insurance companies denying claims, loss of income, and related factors, often combine to force the bankruptcy filing.
Fortunately, companies have built products that can help. But unfortunately, existing solutions can be such a pain to understand and to buy that relatively few people do, despite a well-known celebrity TV spokesduck. It’s called supplemental insurance, and it has a much lower enrollment rate than virtually every other insurance product out there. If you’ve ever tried to purchase it you might understand why: it’s incredibly hard to know what kinds of incidents are covered by what you buy, and if you want to be covered for most things that could cause this financial ruin, you might need to stitch together between two and four supplemental insurance policies (that’s on top of your health, dental, vision, and life plans).
Enter Clara Insurance, a new company based in New York that we are proud to have recently led an investment in. Clara wants to help solve this big financial risk that many American families face by providing a simple and clear insurance product. Clara aims to provide employees and their families receive fast financial compensation to help defray medical costs for up to 93% of the issues that could send them to the emergency room. Using modern actuarial science and robust data, Clara expects to provide this broad coverage at price points that make sense for a wide variety of families across the income spectrum, reducing that big financial risk lurking in every accident, and providing peace of mind. The company plans to launch its first insurance products later this year for individuals and companies based in Texas, with expansion to other states to follow.
Clara is led by entrepreneur Veer Gidwaney, who has started (and sold) two companies prior to Clara. I was fortunate to meet Veer back in 2013, and over the last number of years have gotten to watch him evolve and learn as a CEO. Though we didn’t partner on his previous company, I knew in 2013 that he was the type of founder I wanted to work with (and told him so back then). We’ve spent the last seven years getting to know each other better – time I consider very well spent – and I’m very glad to finally have the chance to work with him.
We’re tremendously excited at Two Sigma Ventures about the potential for Clara. The fear of financial distress caused by medical bills looms large over far too many people and families in the United States. While it’s not an easy problem to solve, there are few things more motivating as an investor than finding a problem this big and this meaningful to tackle, a team you know well that has the right DNA to go after it, and product ideas that we believe could break through to create something transformative. Visit joinclara.com to learn about how Clara works and meet the team behind the product.